"For almost a century, business and government worked in tandem to expand the economic protections afforded working Americans through social insurance programs and career employment," said University of Pennsylvania economist Peter Cappelli. "In the last 25 years, we've stripped most of these away."
Paul Fredo entered unemployment in late 2001 vastly better prepared than most Americans.
He was granted six months of pay — roughly twice the typical severance package, according to WorldatWork, an association of compensation executives. He and his wife had hundreds of thousands of dollars in savings, most of it squirreled away for retirement but available in case of emergencies. They had almost finished financing their sons' college educations. And they had recently paid off their mortgage.
Within a week of the layoff, Fredo began getting in touch with his industry contacts but came up dry. He then started sending out resumes a handful at a time. Still nothing materialized. He eventually pitched 900 companies.
"I got two callbacks and an interview that didn't go anywhere," he said.
By the spring of 2002, Fredo changed tactics and began attending Priority Two, a job networking group at nearby Northway Community Church. There, the group's director, Charlie Beck, offered some advice: "You've got to have a hook so they remember you."
Fredo hated selling himself. But he began telling potential employers to remember him as "PAC Man," for planner, analyst and cost saver. He had business cards printed up with an image of the little yellow video-game figure chomping its way across the face.
The effort produced a few temporary consulting assignments. They were better than the alternatives: a $10-an-hour customer service position at a local Verizon Wireless call center, or a job as a checkout clerk at the neighborhood Giant Eagle supermarket. But Fredo soon discovered that landing a decent temp job was almost as difficult as nailing down a good permanent one.
Fredo's job search was foundering on changes in the labor market that had been underway for 25 years but had begun to show themselves only during the last two recessions. Even as the economy rebounded in 2002, many companies were wary about hiring, especially when it came to taking on senior managers. Top executives didn't want to get stuck with fat payrolls if the recovery fizzled. And thanks to technological breakthroughs and new management techniques, they were squeezing more work out of fewer people.
As Fredo's severance pay began to run out, he was forced to rely more and more on unemployment compensation. But this turned out to be a poor palliative — in large part because of his previous success.
Policymakers have been quick to say that the one element of the nation's unemployment compensation system that has remained unchanged over the years has been the so-called replacement rate, the fraction of a person's pre-unemployment wages covered by the benefits. That has stayed rock-solid at about 50%.
But what they usually fail to mention is that the 50% figure applies to the median worker — the one in the middle of the economic spectrum. For the half of American workers who've made above the median, and especially for those like Fredo who've made far above it, the replacement rate is much lower.
The maximum weekly benefit in Pennsylvania in 2002, when Fredo began collecting, was $442 a week. That was 15% — not 50% — of what he had previously earned.
As Fredo's severance pay finally ran out, so did his employer-provided health insurance. That was a big blow to Fredo and his wife because he has high blood pressure and she is diabetic. The Fredos retained their policy under COBRA, the federal law that requires companies to permit laid-off employees to continue coverage for 18 months as long as they pick up the tab for the premium. The Fredos ultimately switched to a less generous policy. But even for this policy, the premiums run $800 a month.
As 2002 turned into 2003, the Fredos hunkered down further. The couple cut their weekly offerings at church. Donna gave up one of her favorite activities, sending packages of toys and party favors to the children in the North Carolina special-needs class taught by her older son Joseph's wife, Maureen.
Things also changed between Fredo and his youngest son, Stephen. As a boy, Stephen had waited up to put his father's dinner in the microwave and greet him when he got home late from work. Now, Fredo was getting up at 7 a.m. to have coffee with his son before Stephen headed off to his new job as a systems analyst at Children's Hospital in Pittsburgh.
Then the elder Fredo would trudge upstairs to spend the rest of the day — and often much of the night — in a bedroom, glued to his computer screen, searching for work.